Banco do Brasil Profit Falls 12% on Higher Loan Provision

Banco do Brasil SA, Latin America’s largest lender by assets, said second-quarter profit fell 12 percent, matching analysts’ estimates as the bank set aside more money to cover bad loans.

Adjusted net income, which excludes one-time charges, declined to 2.63 billion reais ($1.14 billion) from 2.99 billion reais a year earlier, the Brasilia-based bank said today in a statement. That compared with the average estimate of 2.62 billion reais in a Bloomberg survey of eight analysts. Non-adjusted net income, which includes the BB Seguridade Participacoes SA insurance unit’s initial public offering, was 7.5 billion reais.

Provisions rose 15 percent to 4.2 billion reais in the second quarter from a year earlier as the loan book expanded 26 percent to 638.6 billion reais. Government-controlled lenders such as Banco do Brasil, led by Chief Executive Officer Aldemir Bendine, 49, are boosting credit faster than non-state lenders as President Dilma Rousseff pushes them to help reignite the economy. Economists cut their 2013 growth estimate 13 times in the past 14 weeks, a weekly survey by the central bank shows.

“Banco do Brasil is expanding its loan book at a very sustainable pace,” Bendine told reporters in Sao Paulo today, adding that the bank doesn’t expect credit quality to deteriorate because of the lending expansion.

Banco do Brasil’s rate of debt payments overdue more than 90 days was 1.9 percent, down from about 2.2 percent a year earlier and 2 percent in the previous three months.

Misses Estimate

The provisions were higher than estimates by Banco Bradesco BBI SA analysts including Carlos Firetti, who predicted 3.84 billion reais.

The company raised its estimates for credit growth this year to a range of 17 percent to 21 percent, according to the statement. The previous forecast was 16 percent to 20 percent. Banco do Brasil reduced its estimates for growth in net interest income to 4 percent to 7 percent this year from 7 percent to 10 percent, citing increases in “lines of lower risk.”

Itau Unibanco Holding SA and Banco Bradesco SA, the nation’s two biggest lenders by market value, cut their credit-growth forecasts last month, citing worsening prospects for the economy. Itau lowered its 2013 credit estimate to as much as 11 percent from 14 percent, while Bradesco reduced its forecast to as much as 15 percent from 17 percent.

Shares Rise

Banco do Brasil climbed 1.7 percent to 23.34 reais at 5:06 p.m. in Sao Paulo. The shares fell 10 percent this year through yesterday, compared with a decline of 17 percent for Brazil’s Ibovespa benchmark index.

BB Seguridade raised 11.5 billion reais in April with its share offering, the world’s largest IPO this year.

Banco Votorantim, the auto-loan company in which Banco do Brasil has about a 50 percent stake, reported a loss of 196 million reais, after a loss of 278 million reais in the three previous months. Banco do Brasil expects Votorantim to post a profit by the fourth quarter of this year, Chief Financial Officer Ivan Monteiro told reporters in Sao Paulo today.

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